REALTORMAG. REALTOR.ORG REALTOR® JULY/AUGUST 2015 11
opment of the Crown Imports building
in Phoenix. Venture REI and two other
developers partnered to buy the warehouse, built in 1959, for $1.8 million and
will invest $6 million to redevelop it as a
mixed-use restaurant and retail venue.

“Our tenants were looking for somethingunique. They were tired of the typicalcookie-cutter buildings in our area,”Noma says. “We don’t have a lot of oldproperties, with Arizona being a newerstate, and there aren’t a lot of developerswith the experience.”Noma says the efforts they made topreserve massive exposed beams andrich wood trusses in the building helpedattract top-tier tenants that offset thecosts of what they’re branding as Crownon 7th. “We knew we’d have to get restau-rants, because they pay more and tendto stay longer. It wasn’t going to workwith a couple of dry cleaners and a gym,”he says. “You’ve got to be strategicallythinking about your tenant demographicfrom the outset.”

Crunching the Numbers

Repurposing an older structure can easily
cost more than building new, but there
are ways to reduce costs besides attracting deep-pocketed tenants. Hudson says
that by the time they apply both state and
federal tax incentives for redeveloping
older buildings, savvy developers in her
area can write off as much as 45 percent
of qualified expenses on a project. “It can
be more expensive [to redevelop], but in
the long run these projects tend to pay
off,” she says. However, she adds that
obtaining tax breaks requires preserving
a property in accordance with local laws.

“If you’re not taking advantage of taxcredits, you have more flexibility.”Noma didn’t get any tax credits forCrown on 7th, but says municipal officialswere eager to see the property rede-veloped and helped the project along inother ways, such as by widening the roadaround the development. “The city’s beenreally receptive and supportive,” he says.

“They really like taking these older build-ings and repurposing them, so they’vebeen a good partner.”Indeed, municipalities often welcomeredevelopment projects because theytransform vacant or underused buildingsinto spaces that contribute to city coffers.

“The economic impact is substantial,”he says. “We started in the depths ofrecession, and we were able to take overvacant retail big boxes that were justsitting in these markets and generatemillions and millions of dollars in sales taxrevenue and provide jobs for hundredsand hundreds of employees.”However, Noma says no matterhow well you plan out the financials,you should also build some flexibilityinto your cost-benefit analysis for theinevitable surprises that come up. “Wehad to replace part of the roof where wehadn’t planned on it, just to get the suitesizes that we wanted for our tenants. Sowe’ve had to borrow in other places in ourbudget [to cover that],” he says. “Beingable to roll with the punches is important.Things do balance out in the end.”Hudson agrees real estate pros in thisniche should be ready for unexpecteddelays and outlays. “There are alwaysgoing to be surprises,” she says. “Thesebuildings have changed so much overtime and as you start peeling back thoselayers of history, you may find, ‘Oh wow,there’s a sewer line there!’ ” But she notesthe surprises can be pleasant too, suchas finding out that a drop ceiling had beencovering beautiful stained glass windows.

Designing Neighborhood Rebirth
Sometimes a repurposing project can
be part of a larger effort. By the time
Quicken Loans established its new
headquarters in downtown Detroit, its
parent company, Rock Ventures, had
repurposed so many buildings that it
decided to form a design group called
dPop! to offer similar solutions to other
corporations and businesses looking to
rethink vintage office space. The new
company took up residence in the basement of Chrysler House, a white brick
and terra-cotta skyscraper designed by
famed Chicago architect Daniel Burnham
in the first decade of the 20th century.
The basement had been a shooting range
for security officers wanting to keep skills
sharp at the former Dime Savings Bank of
Detroit, which once owned the building.

The offices of dPop! merge glittering
bank features with an industrial-chic
aesthetic that seems natural in the